Under the new tax regime, cars attract the top tax rate of 28 per cent, besides attracting a cess of 1-15 per cent in order to create a corpus to compensate states for loss of revenue from GST implementation. 

The GST Council on Monday approved a proposal to hike cess on SUVs, mid-sized, large and luxury cars from present 15 per cent to 25 per cent. These mid-segment to luxurious cars had become cheaper following the implementation of GST (Goods and Services Tax) on July 1. Under the new tax regime, cars attract the top tax rate of 28 per cent, besides attracting a cess of 1-15 per cent in order to create a corpus to compensate states for loss of revenue from GST implementation.

In a statement, the Finance Ministry said after introduction of GST, the total tax on motor vehicles (GST plus compensation cess) has come down vis-a-vis the total incidence in pre-GST regime. “The GST Council considered this issue in its 20th meeting held on August 5 and recommended that the central government may move legislative amendments required for increasing the maximum ceiling of cess leviable on motor vehicles falling under headings 8702 and 8703 to 25 per cent instead of the present 15 per cent,” the statement read.

However, the decision on when to raise the actual cess leviable on the same will be taken by the GST Council in due course, the statement added.

An amendment to the Schedule to section 8 of the GST (Compensation to a State) Act, 2017 is required to increase compensation cess. The vehicles that come under headings 8702 and 8703 include mid-segment, large cars, SUVs and motor vehicles which can carry more than 10 persons, but less than 13. In addition, hybrid vehicles with engine capacity of more than 1500 cc and mid segment hybrid cars of less than 1500 cc also fall in the category.

Prices of most SUVs came down significantly between Rs 1.1 lakh and Rs 3 lakh following implementation of GST, which subsumed over a dozen central and state levies like excise duty, service tax and VAT, from July 1.

Source : Economic Times

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